I think this is an unfortunate turn. Granted, an occupied building is better, I haven't had any positive experiences with hookah bars. The last time I walked from L'etranger down to High St. late at night I ran into a street dealer just north of the hookah bar at Mt. Pleasant and 4th, but perhaps that was a coincidence.
The owners of this building got it for next to nothing. Yeah, it's been up for rent for awhile, but they leased the three townhouses north of it rather quickly, so I doubt they're losing on their investment, even with it vacant. Obviously, it's not an easy space to lease despite it being a very nice building. This intersection is still a tough one.
There are a limit number of types of commericial enterprises that tend to operate in low-income neighborhoods like WP. Carryouts, hair shops, cell phone stores, storefront chuches, are typical. Also, it takes balls to operate in places like this. The Muslim community goes where most mainstream American entrepeneurs fear to go. Perhaps that's because many of them come from cities and countries that are even more risky. As a business model, I bet hookah is very profitable. So why sell coffee if the margin for "strawberry farts" is much greater. We gotta roll with it, but I'd rather see a bike co-op.